On appeal from Superior Court, Chancery Division, Monmouth County.
Fritz, Bischoff and Morgan. The opinion of the court was delivered by Morgan, J.A.D.
[166 NJSuper Page 420] At issue on this appeal is whether an employee's interest in a private pension fund, designated an approved plan by the United States Department of Labor under the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1001 et seq. , can be reached by garnishment to satisfy a former wife's judicially declared right to alimony. Subsumed thereunder are issues concerning the extent of federal preemption of state action affecting private pension plans covered by ERISA and the presence vel non of constitutionally interdicted conflict between ERISA's proscription against "assignment and alienation" of pension income, 29 U.S.C.A. § 1056(d), and state statutory authority permitting garnishment of a defaulting spouse's income to satisfy a claim for alimony. N.J.S.A. 2A:17-56.1.
There being no dispute concerning the facts pertinent to these issues, the controversy herein can be disposed of as a matter of law. A judgment of divorce, entered on August 8, 1977 and filed August 26, 1977 in the Superior Court of New Jersey, ordered Kenneth E. Traphagen, a former employee of Western Electric Company (Western), to pay his former spouse, Evelyn C. Traphagen, $2,462.60 plus alimony of $335 a month. Not having received monies in compliance with this order, the wife sought to reach a portion of Traphagen's income interest in his pension from Western, and on November 7, 1977 a notice of motion for an order of execution for the payment of alimony was served on Western. Western, the garnishee, appeared in opposition and argued unsuccessfully against entry of the requested order, and again at a subsequent motion for reconsideration based upon promulgation of Treasury Regulation § 1.401(a)-13, 43 C.F.R. 6942-44 (1978). Western appeals from entry of the order of garnishment.
Western's pension plan, which provides Traphagen with a net monthly pension benefit of $851.34, is covered by the terms and conditions of ERISA. Pertinent to the issues raised herein, the plan contains a proscription against the assignment and alienation of pensions.*fn1 This proscription is mandated by 26 U.S.C.A. § 401(a)(13), and 29 U.S.C.A. § 1056(d)(1) of ERISA, provisions critical to a disposition of the issues raised herein. 29 U.S.C.A. § 1056(d), effective January 1, 1976, provides in relevant part:
(1) Each pension plan shall provide that benefits provided under the plan may not be assigned or alienated.
(2) For the purposes of paragraph (1) of this subsection, there
shall not be taken into account any voluntary and revocable assignment of not to exceed 10 percent of any benefit payment, or of any irrevocable assignment or alienation of benefits executed before September 2, 1974. The preceding sentence shall not apply to any assignment or alienation made for the purposes of defraying plan administration costs. * * *
A cognate amendment to the Internal Revenue Code of 1954 was made consistent with ERISA proscription against assignment or alienation. 26 U.S.C.A. § 401(a)(13) now provides:
A trust shall not constitute a qualified trust under this section unless the plan of which such trust is a part provides that benefits provided under the plan may not be assigned or alienated. For purposes of the preceding sentence, there shall not be taken into account any voluntary and revocable assignment of not to exceed 10 percent of any benefit payment made by any participant who is receiving benefits under the plan unless the assignment or alienation is made for purposes of defraying plan administration costs. * * * This paragraph shall take effect on January 1, 1976 and shall not apply to assignments which were irrevocable on September 2, 1974.
Regulations, which were adopted by the Treasury Department and upon which Western relied in its reargument, interpret the statutory proscription against assignment or alienation to include involuntary transfers by "attachment, garnishment, levy, execution or other legal or ...